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Business Law Section E-News

Current News and Events from the State Bar of California Business Law Section.

Here is your September 2016 eNews from the Business Law Section (“BLS”):

Limited Seats Still Available for State Bar Breakfast Sponsored by the BLS on October 1, 2016, 7:30 a.m.

Join fellow BLS members, as well as past and present leaders of the Business Law Section and its 15 Standing Committees, at the annual BLS breakfast meeting at the State Bar of California’s 89th Annual Meeting in San Diego, California on Saturday, October 1, 2016 at 7:30 a.m.  This year Ann Yvonne Walker will become the first female recipient of the Business Law Section’s Lifetime Achievement Award.  The keynote speaker for the event will be author and economist Alan Nevin.  Mr. Nevin will explore the unique economic and demographic attributes of the State of California and how they set us apart in our nation and the world as a whole.  Mr. Nevin will focus on California’s resources, businesses and industries, as well as its demographics, including our population’s aging patterns, ethnicity, and future employment and housing needs.  Seats are limited at this popular ticketed event (cost is $35 per person, breakfast included).  Be sure to sign up for the BLS breakfast meeting when you register onsite for the State Bar Annual Meeting.

Don’t Miss the BLS Standing Committee Programs at the State Bar of California 89th Annual Meeting

My Annual MeetingThe State Bar of California returns to San Diego for the 2016 Annual Meeting of the State Bar on September 29, 2016 – October 2, 2016. Mark your calendars and sign up now for this event, which blends business, education, entertainment and the opportunity to meet and engage with law professionals from throughout California.  You can now register onsite for the State Bar of California’s 89th Annual Meeting.

The four-day meeting will showcase an education agenda consisting of MCLE seminars covering a variety of substantive topics, including legal technology, ethics, bankruptcy, business litigation, and other key areas of interest.  Many of the BLS Standing Committees will be presenting programs at the Annual Meeting. A complete list of BLS presentations at the Annual Meeting is provided as follows.

The BLS Committees will make the following presentations at the Annual Meeting:

Insolvency Law Committee

Program 22

Ninth Circuit Bankruptcy Year in Review
Friday, September 30 – 8:30 a.m. – 10:00 a.m.

Program 42

10 Things Not To Do When Insolvent
Friday, September 30 – 1:30 p.m. – 3:00 p.m.

Program 53

Managing Expectations:  Understanding the Roles of the Main Actors in a Bankruptcy Case
Friday, September 30 – 3:30 p.m. – 5:00 p.m.

Business Litigation Committee

Program 43

The Effective and Ethical Use of Expert Witnesses
Friday, September 30 – 1:30 p.m. – 3:00 p.m.

Health Law Committee

Program 73

Medical and Health Care Privacy and Data Breach Compliance for Non-Health Care Clients and Their Attorneys
Saturday, October 1 – 10:30 a.m. – 12:00 noon

Internet Law Committee

Program 82

Cyberspace Law 101:  Representing Clients on the Internet
Saturday, October 1 – 1:30 p.m. – 3:00 p.m.

Corporations Committee

Program 102

The Expectation of Privacy:  The Roles and Responsibilities of Businesses
Sunday, October 2 – 8:30 a.m. – 10:00 a.m.

Attend the BLS Standing Committee Reception at the State Bar Annual Meeting

Are you curious about one or more of the BLS Standing Committees?  Are you looking for an opportunity to cross network, collaborate and socialize with other fellow BLS members?  Come find out what it is all about at the BLS reception at the State Bar Annual Meeting on Friday, September 30, 2016, from 5 p.m. to 7 p.m.  The reception will be in the Leucadia Room in the South Tower (near the Tequila Bar & Grille) at the San Diego Marriott Marquis & Marina.  All Standing Committee members, advisors and friends are invited to join and socialize with members of all BLS’s Standing Committees.

Selected Developments in Business Law — California Business Litigation

Courtesy of CEB, the BLS now provides selected legal developments in areas of California business law that are covered by CEB’s publications.  This month’s feature is from the July 2016 update to California Business Litigation (Cal CEB).  References are to the book’s section numbers.  See CEB’s BLS Landing Page for special discounts for Business Law Section members.  The most significant legal developments affecting California business litigation practice include many new updates in such important practice areas as unfair competition, trade secrets, antitrust, trademark, copyright, patents, business torts, insurance bad faith, and employment practices: 

Unfair competition. Restitution is measured as the difference between what the plaintiff paid and what the plaintiff received. In re Tobacco Cases II (2015) 240 CA4th 779. See §3.31.

Civil penalties are a remedy, not part of a cause of action; thus penalties may be determined after summary judgment is entered on an unfair competition claim. People v Superior Court (Cahuenga's the Spot) (2015) 234 CA4th 1360. See §3.32.

Before filing, the plaintiff must make a "reasonable attempt" to settle, considering all relevant circumstances. Carian v Department of Fish & Wildlife (2015) 235 CA4th 806. See §3.33.

Trade secrets. Recent federal decisions recognizing preemption of common law claims include Lifeline Food Co. v Gilman Cheese Corp. (ND Cal, May 15, 2015, No. 5:15–cv–00034–PSG) 2015 US Dist Lexis 64155, *2 (CUTSA preempts common law conversion claim), and NetApp, Inc. v Nimble Storage, Inc. (ND Cal 2014) 41 F Supp 3d 816, 839 (dismissing causes of action for trespass to chattel and unfair competition based on alleged misappropriation of proprietary information). See §4.2.

Preemption exists even when a violation of CUTSA is not pleaded. See Total Recall Technols. v Luckey (ND Cal, Jan 16, 2016, No. C 15-02281 WHA) 2016 WL 199796, *6 (though plaintiff "studiously avoided assertion of any trade secret claims," its claims for conversion, fraud, constructive fraud, and violation of UCL all were preempted by CUTSA). See §4.2.

The court in Finton Constr., Inc. v Bidna & Keys, APLC (2015) 238 CA4th 200 affirmed grant of an anti-SLAPP motion and dismissal of an action alleging that a law firm was guilty of conversion and receipt of stolen property on the basis of its receipt of alleged trade secrets from a client accused of misappropriating those secrets. See §4.43.

In Atlantic Inertial Sys., Inc. v Condor Pac. Indus. of Cal., Inc. (CD Cal, June 18, 2015, No. 2:08–cv–02947–CAS (PJWx)) 2015 US Dist Lexis 79331, *16, the court articulated the following factors that should be considered in determining whether to award a royalty: "(1) whether the defendant put the trade secret to commercial use; (2) whether some benefit, pecuniary or otherwise, accrued to the misappropriating defendant; (3) whether plaintiff incurred costs in developing the trade secret; and (4) whether the parties discussed a licensing agreement." See §4.67.

Though the plaintiff claimed not to have based suit on the "inevitable disclosure" theory rejected by California courts, the court of appeal could find "no [other] basis for [plaintiff's] allegation of threatened misappropriation" and accordingly affirmed award of attorney's fees against plaintiff. Cypress Semiconductor Corp. v Maxim Integrated Prods., Inc. (2015) 236 CA4th 243, 265. See §4.70.

Antitrust. In oligopolistic markets, those markets comprising only a few sellers (as opposed to competitive markets, those markets comprising many small firms), conscious parallelism is not the result of an agreement but "can be a necessary fact of life." In re Chocolate Confectionary Antitrust Litig. (3d Cir 2016) 801 F3d 383, 397. See §5.6.

A staffing decision that affects only one employee generally will not constitute an antitrust violation. DeCambre v Rady Children's Hosp.—San Diego (2015) 235 CA4th 1, 26. See §5.125.

Trademark. In In re Tam (Fed Cir 2015) 808 F3d 1321, the Federal Circuit held the prohibition on disparaging marks in 15 USC §1052(a) unconstitutional under the First Amendment. See §6.33.

A trademark applicant's intention to use the mark must be demonstrable and more than a subjective belief. M.Z. Berger & Co. v Swatch AG (Fed Cir 2015) 787 F3d 1368. See §6.47.

In the keyword advertising context—when a user performs a search on the Internet and, on the basis of keywords contained in that search, the resulting web page displays certain advertisements containing products for sale—likelihood of initial interest confusion will turn on the answers to two questions: (1) Who is the relevant reasonable consumer? and (2) What would the consumer reasonably believe given what he or she saw on the screen? Multi Time Mach., Inc. v Amazon.com, Inc. (9th Cir 2015) 804 F3d 930, 937, cert denied (2016) ___ US ___, 136 S Ct 1231. See §6.83.

A supplemental pleading may be used to address a deficiency in standing. Northstar Fin. Advisors, Inc. v Schwab Invs. (9th Cir, Apr. 28, 2015, No. 11-17187) 2015 US App Lexis 7027. See §6.127.

In order to establish nonfunctionality, a party must demonstrate that the product feature serves no purpose other than identification. Apple Inc. v Samsung Electronics Co. (Fed Cir 2015) 786 F3d 983. See §6.136.

Copyright. A photographer may not register photographs taken over the past 17 years at once as a compilation or as a single work comprising all 8,000 photographs. Senisi v John Wiley & Sons, Inc. (SD NY 2015) 117 USPQ2d 160572. See §7.24.

No distribution or public performance of copyrighted work occurs when a subscriber uses a satellite television provider's technology, comprising hardware and software, to transmit programming the subscriber already received to household members. Fox Broad. Co. v Dish Network, LLC (CD Cal 2015) 114 USPQ2d 1100. See §7.61.

In ABC, Inc. v Aereo, Inc. (2014) 573 US ___, ___, 134 S Ct 2498, 2509, the United States Supreme Court held that by streaming television broadcasts to subscribers over the Internet, whether a single subscriber or multiple subscribers viewed the program, the defendant infringed on the exclusive public performance rights of copyrights held by television broadcasters. See §7.61.

A licensing agent for photographers with an exclusive license to grant licenses has a property interest in the copyrighted photographs, which confers on the agent standing to bring an infringement action for their unauthorized use. Minden Pictures, Inc. v John Wiley & Sons, Inc. (9th Cir 2015) 795 F3d 997. See §7.65.

Although joint authors cannot sue each other for infringement, they can sue for an accounting and profits. Corbello v DeVito (9th Cir 2015) 777 F3d 1058. See §7.65.

In Copeland v Bieber (4th Cir 2015) 789 F3d 484, the Fourth Circuit followed the Second and Eighth Circuits in finding "analytic dissection is inapplicable to the intrinsic analysis, because a work's intended audience 'does not make the distinction' between protectable and unprotectable elements and instead encounters a work 'as one object.'" See §7.70.

As a matter of law, an agreement between a licensing agent and a third party can retroactively cure claims of infringement by the exclusive license holder against the third party. Young-Wolff v John Wiley & Sons, Inc. (SD NY, Jan. 12, 2016, 12–CV–5230 (JPO)) 2016 US Dist Lexis 3614. See §7.124.

Patents. The Federal Circuit has in at least one instance considered a small number of claims to be representative of all claims for purposes of determining patent eligibility. Content Extraction & Transmission LLC v Wells Fargo Bank, N.A. (Fed Cir 2014) 776 F3d 1343, 1348, cert denied (2015) ___ US ___, 136 S Ct 119. See §8.2.

Some courts focus on the essence of the claims rather than the specific wording to determine whether the claims recite a natural law, and then they look at the point of novelty to determine whether there is "something more." See, e.g., Genetic Veterinary Sciences, Inc. v Canine EIC Genetics, LLC (D Minn 2015) 101 F Supp 3d 833, 843. See §8.4.

The best guidance on subject matter allowability for software and business methods is that provided by the United States Patent and Trademark Office (PTO) in its July 2015 update. See http://www.uspto.gov/sites/default/files/documents/ieg-july-2015-update.pdf. The update gives both rationales and examples of what is and what is not considered subject matter eligible. See §8.5.

In Suprema, Inc. v ITC (Fed Cir 2015) 796 F3d 1338, the Federal Circuit held that patentees may prevent importation of goods that directly infringe patent claims, but they may not prevent importation of goods that are merely used to create an infringing product, even if the seller of an infringing product induces infringement. See §8.20.

When the patented technology is only of minor importance to the overall functionality of a product, royalty rates demanded by similar patent pools are relevant indicators of RAND (reasonable and non-discriminatory) royalties. Microsoft Corp. v Motorola, Inc. (9th Cir 2015) 795 F3d 1024. See §8.29.

In Lexmark Int'l, Inc. v Impression Prods. (Fed Cir, Feb. 12, 2016, 2014-1617, 2014-1619) 2016 US App Lexis 2452, foreign sales of U.S.-patented printer cartridges, even when made by or with the approval of the U.S. patentee, did not exhaust the patentee's U.S. patent rights in the article sold. See §8.38.

A case may be deemed exceptional even when a party's conduct is not independently sanctionable. However, the court must explain its rationale for determining enhanced attorney fees, and deterrence is not a proper factor for that analysis. Lumen View Technol. LLC v Findthebest.com, Inc. (Fed Cir 2016) 811 F3d 479. See §8.52.

Although under 35 USC §292 only the federal government or a competitor injured from a product's false marking may bring suit, the term "competitor" has been interpreted to include a potential competitor who has attempted, even unsuccessfully, to enter the market. Sukumar v Nautilus, Inc. (Fed Cir 2015) 785 F3d 1396. See §8.56.

Covered business methods include any "method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions." Pub L 112–29, §18(d)(1), 125 Stat 284. However, the definition of "covered business method patent" is not limited to products and services of the financial industry or to patents owned by or directly affecting the activities of financial institutions such as banks and brokerage houses. The statutory definition makes no reference to financial institutions as such, nor does it limit itself only to those institutions. Versata Dev. Group, Inc. v SAP Am., Inc. (Fed Cir 2015) 793 F3d 1306. See §8.95E.

The Supreme Court of California concluded that reverse payment settlements are not immune from scrutiny, even if they limit competition no more than a valid patent would have. In re Cipro Cases I & II (2015) 61 C4th 116, 122. Cipro Cases reversed a court of appeals holding in which the "scope of the patent" test insulates from antitrust scrutiny virtually any agreement that restrains trade no more than a valid patent itself would have. See §8.112.

The U.S. Supreme Court clarified that an appellate court should use a clear error standard of review (instead of a de novo standard) when reviewing a district court's resolution of an underlying factual dispute in the construction of a patent claim. Teva Pharms. USA, Inc. v Sandoz, Inc. (2015) 574 US ___, 135 S Ct 831, 834. See §8.115.

A defendant's belief regarding patent validity is not a defense to an induced infringement claim. Commil USA, LLC v Cisco Sys. (2015) 575 US ___, 135 S Ct 1920. See §8.122.

In 2015 an issue arose as to whether post-grant review or other aspects of the Leahy-Smith America Invents Act (AIA) signaled congressional intent to limit the scope of discovery permissible in 28 USC §1782 proceedings. The answer provided by the Ninth Circuit is that enactment of the AIA had no such effect. Akebia Therapeutics, Inc. v Fibrogen, Inc. (9th Cir 2015) 793 F3d 1108. See §8.138.

When venue is disputed with respect to federal or state court, the Federal Circuit applies the well-pleaded-complaint rule. Microsoft Corp. v Motorola, Inc. (9th Cir. 2015) 795 F3d 1024, 1034 (Federal Circuit transferred case to Ninth Circuit when gravamen of complaint was contract rather than patent rights). See §8.142.

In TransWeb, LLC v 3M Innovative Props. Co. (Fed Cir 2016) 812 F3d 1295, the Federal Circuit upheld an award of approximately $26 million to TransWeb, including trebled attorney fees as antitrust damages. See §8.169.

In SCA Hygiene Prods. Aktiebolag v First Quality Baby Prods., LLC (Fed Cir 2015) 807 F3d 1311, the court concluded that 35 USC §282 codifies laches as a defense to legal relief in patent infringement suits, and courts must weigh the facts underlying laches when considering an injunction. Absent extraordinary circumstances, laches does not preclude an ongoing royalty. See §8.180.

Unfair competition on the Internet. Personal jurisdiction must exist for all claims brought against a defendant, although if one claim establishes proper jurisdiction, a district court may exercise pendent jurisdiction over related claims. Picot v Weston (9th Cir 2015) 780 F3d 1206. See §9.7.

When an agreement is negotiated via e-mail between parties in different jurisdictions, both jurisdictions may be considered the place where the contract was negotiated. Steven Cohen Prods., Ltd. v Lucky Star, Inc. (D Nev, Mar. 23, 2016, No. 2:12-cv-01995-GMN-CWH) 2016 US Dist Lexis 37786. See §9.8.

In a defamation action, the out-of-state defendant's social media postings about the plaintiff's activities in California were not adequate to confer jurisdiction. Burdick v Superior Court (2015) 233 CA4th 8. Burdick cited the U.S. Supreme Court's decision in Walden v Fiore (2014) 571 US ___, ___, 134 S Ct 1115, 1125 n9, noting that jurisdictional analysis should focus on the defendant's relationship to the forum, not on the defendant's relationship to the plaintiff. See §9.12.

Before sending a takedown notice, a copyright holder must have a subjective good faith belief that the use of the copyrighted material is actually infringing and is not in fact fair use. Lenz v Universal Music Corp. (9th Cir 2016) 815 F3d 1145. See §9.55A.

Business torts. In name.space, Inc. v ICANN (9th Cir 2015) 795 F3d 1124, the court claim dismissed a claim of intentional interference with prospective advantage when the plaintiff failed to allege a wrongful act outside of interference itself. See §11.13.

In a case involving allegations of intentional infliction of emotional distress, the court found the plaintiff was likely to prevail when the accusations against him were more than "mere insults, indignities, threats, annoyances, oppressions or other trivialities." Grenier v Taylor (2015) 234 CA4th 471, 486. See §11.63.

No claim may be asserted under an implied covenant of good faith and fair dealing or for bad faith unless policy benefits are due under the contract. Grebow v Mercury Ins. Co. (2015) 241 CA4th 564. See §11.99.

Questions of whether an issue is a matter of public concern implicate the anti-SLAPP statute. See CCP §425.16. In Bikkina v Mahadevan (2015) 241 CA4th 70, statements made in a small gathering of scientists alleging that a researcher plagiarized and falsified data did not arise from protected activity in a public forum, despite a broad public interest in the researcher's topic of climate change. See §11.127.

Insurance bad faith. An insurer that refuses to accept a reasonable settlement offer may be liable to its insured for the amount of any judgment in excess of policy limits. 21st Century Ins. Co. v Superior Court (2015) 240 CA4th 322. See §12.14.

Employment practices. The issue of whether the parties agreed to class or individual arbitration of claims is a gateway issue to be determined by the courts. Garden Fresh Restaurant Corp. v Superior Court (2014) 231 CA4th 678; Guess?, Inc. v Russell (CD Cal, Nov. 12, 2015, No. 2:15-cv-05191-CAS(ASx)) 2015 US Dist Lexis 154621. See §13.79A.

Despite criticism from various courts, the NLRB continues to maintain that class action waivers by employers subject to the National Labor Relations Act (NLRA) are an unfair labor practice. See, e.g., Amex Card Servs. Co. (2015) 363 NLRB No. 40 (class action waiver was unfair labor practice, despite Fifth Circuit's rejection of NLRB's position). See §13.79A.

For arbitration subject to the Federal Arbitration Act (FAA), the parties may delegate the threshold question of arbitrability to the arbitrator. However, that delegation clause must be clear and unmistakable. Inconsistent delegation clauses are not clear and unmistakable delegation. O'Connor v Uber Technols., Inc. (ND Cal, Dec. 10, 2015, No. 13-cv-03826-EMC) 2015 US Dist Lexis 16652. See §13.79A.

Except for record-keeping purposes, "applicant" includes an individual who can prove that he or she has been deterred from applying for a job by an employer's or other covered entity's alleged discriminatory practice. It does not include an individual who without coercion or intimidation willingly withdraws an application before being interviewed, tested, or hired. 2 Cal Code Regs §11008(a). See §13.87.

CEB Offers Discounts to BLS Members

CEB is currently offering discounts to BLS Members, including 10% off the price of a wide selection of CEB print and OnLAW publications as well as savings on section dues.  For more information on these and other CEB discounts, click HERE. 

Reach a State-Wide Audience by Publishing in the Business Law News

The Business Law News (BLN) is seeking articles of general interest to business law practitioners for its next publication.  With approximately 8,200 members, the BLS has a wide-ranging audience.  Please submit your articles to Everett L. Green, Everett.L.Green@usdoj.gov

A subscription to the BLN is one of the most significant membership benefits of the BLS.  Publishing in the BLN is a terrific opportunity both to influence the discourse in the areas in which you practice and to market yourself and your skill set. Now is your chance to participate! 

You can find the BLN’s submission guidelines HERE.  Finally, have you been interested in getting involved in the BLS but don’t know where to start?  BLN is now seeking enthusiastic section members to join its Editorial Board.  You can find more information about the BLN Editorial Board HERE and the application to join BLN HERE.

Keep Up With Current Legal Developments by Receiving eBulletins Specifically Tailored for Your Field

The 15 BLS Standing Committees publish eBulletins announcing developments in their area of law and upcoming events open to BLS members. Click HERE to sign up to receive these eBulletins from any BLS Standing Committee completely free of charge

Showcase Your Knowledge:  Follow the BLS on Social Media and Contribute to Discussions

We all know that social media can help drive new business.  Did you know that the BLS maintains a presence on LinkedIn [link].  Twitter [link] and Facebook [link] where it posts regular updates about new cases, new regulations, key legislative developments, and news and events from the BLS’s Standing Committees?  What you may not know is that you can not only send items to the BLS to post or tweet, but also suggest items from your own social media pages for the BLS to re-post, re-tweet, or like.  Doing so expands the reach of what you have to say to everyone who likes or follows the BLS on its various social media platforms, and may result in the BLS following you!  Please submit your suggested items for consideration or direct any questions to BLS Social Media Subcommittee Chair, Sarah DeDiego (sarah@dediegolaw.net); BLS Vice-Chair of Member Services, James P. Hill (hill@sullivanhill.com); or BLS Chair, Rob Harris (rob@bindermalter.com), and join the ever expanding discussion!

Amplify Your Professional Reputation by Joining a Standing Committee

Standing Committees continue to accept applications to fill vacant seats.  Practitioners and other legal professionals who are members of the BLS and who have at least five years of experience are eligible to apply.  Membership on a committee affords unique opportunities to participate in the creation of law in your practice area, to get to know and be known by other practitioners, to work with the recognized leaders in your field, and to stay on the cutting edge of developments and practice techniques.  Membership is a rewarding experience that keeps one ahead of, and in touch with, business law developments.  Most committees meet once a month, often by phone.  A full list of the Standing Committee meeting dates for October are listed below.  A description of the required commitment and application process, along with a link to the application, can be found HERE.

Attend a Standing Committee Meeting and Participate in Your BLS

The BLS achieves its goals through the work of its 15 Standing Committees.  You are invited to attend the regular monthly meeting of any BLS Standing Committees (see below for meeting dates).  These monthly meetings provide attendees an excellent opportunity to chat with committee members and other lawyers with a similar expertise.  Some committees even offer free MCLE credit!  Please see the contact person listed below to RSVP or request more information.  Follow us on Twitter @calbarbuslaw.  Use a Standing Committee’s hashtag to search for tweets by that committee in its designated field and to re-tweet.

Standing Committee Meeting Dates for October

For a list of upcoming meeting dates and contact persons, see Standing Committee Meetings HERE. 


Diana D. Herman, Editor-in-Chief
Monique Jewett-Brewster, Contributing Editor
Peter M. Menard, Contributing Editor
Kristina Del Vecchio, Contributing Editor
Jim Hill, BLS Vice Chair, Member Services
Robert G. Harris, BLS Chair